Billionaire Li Ka-Shing Says China’s Economic Outlook Is Bright

By: Bloomberg

Trade surplus, income from services help counter mounting debt

Tycoon was criticised by Chinese state media last year

Hong Kong’s richest man said China’s economic outlook is bright in the long term, casting a vote of confidence in a country that’s growing at its slowest pace in a quarter century.

China continues to have a trade surplus, the services industry is generating income and foreign money is flowing in, billionaire Li Ka-shing told Bloomberg Television’s Angie Lau in his first interview with international media since 2012. He also indicated that investors focusing on the country’s rising debt levels are missing out on the larger picture.

"The long-term outlook for the mainland is good," the 87-year-old chairman of CK Hutchison Holdings Ltd. said from his office atop the Cheung Kong Center building in downtown Hong Kong. "People only see the debt in the state-owned enterprises and in households, when they need to recognize that China is a big exporter."

Those export receipts -- a "positive for China" according to Li -- helped the trade surplus swell to 3.7 trillion yuan ($560 billion) last year, providing a buffer as the weaker yuan spurred capital outflows.

Li’s confidence in the world’s second-largest economy comes amid signs of stabilization thanks to government stimulus measures. Yet skeptics abound, with the International Monetary Fund this month citing rapidly rising credit and excess industrial capacity among risks threatening the nation’s medium-term prospects.

China’s total borrowings surged to 247 percent of economic output last year from 164 percent in 2008. That’s faster than the increase in the U.S. and U.K. during the run-up to the global financial crisis. China has accumulated debt faster than any Group of 20 nation over the past decade, according to Tom Orlik, an economist for Bloomberg Intelligence.

Li, who was born in the southeastern Chinese city of Chaozhou, has much at stake in the mainland. His real-estate unit, Cheung Kong Property Holdings Ltd., counts about half its revenue from there and has dozens of properties in the country spanning thousands of acres. His flagship company, CK Hutchison, generated 14 percent of its earnings before interest and taxes from China, where he operates about 2,500 Watsons and ParknShop stores.

Consumption has remained a prop for China’s slowing economy. Gross domestic product expanded 6.9 percent last year, the weakest pace since 1990, and is forecast by economists to increase 6.5 percent this year.

Rising China

Li, who spoke on Thursday, owes much of his success to China. In the late 1970s, the then-emerging tycoon was asked "to come in" to the Chinese market, even before it was clear that Deng Xiaoping had taken the reins of power, said Li, who forged close ties with the late paramount leader and still refers to him as "Uncle Deng." Li had a sense that things were about to change, he said.

"At that time, China gave me a very hopeful feeling," Li said.

China’s ensuing industrialization -- on a scale the world had never seen -- made Li one of its biggest beneficiaries. Though his $28 billion fortune is currently the third highest in Asia on the Bloomberg Billionaires Index, he’s often been atop of the list, ranking as the region’s wealthiest tycoon as recently as three months ago.

Chinese state media began criticizing Li last year, accusing the Hong Kong tycoon of reducing his investments in the country at a time of slowing growth. The Communist Party’s People’s Daily even posted a commentary saying Li’s diversification away from China cast a shadow over the country.

In September, Li took the rare step of issuing a three-page rebuttal to such criticism, expressing his full confidence in China and its government.

"Of course, when I read the article, I considered it misguided," Li said. Since starting to invest in China in the late 1970s, "I’ve never stopped," he said.

bloomberg.com

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